To meet global capital requirement norms (or Basel III norms) of public sector banks in the country, the Union Finance Ministry is likely to finalise Rs 14,000-crore capital infusion into the banks by the end of this month. An official concerned said that the government has received capital requirement proposals from all public sector banks and it is evaluating their proposals at the moment. Hopefully, capital allocation to banks would be finalised by August-end.
Thereafter, fund allocation will be done to individual banks by issue of preferential shares, sources said, adding rights issue is not a favourable option at the moment as stock prices are very low, sources added.
Government’s holding will increase if capital infusion is through preferential allotment of shares. Banks can explore other routes when conditions are conducive and the government will also get better return on its stake dilution, sources said.
Union Finance Minister P Chidambaram had said all public sector banks are meeting Basel III requirements for capitalisation, though four of them — Indian Overseas Bank, IDBI BankBSE 0.50 per cent, Bank of Maharashtra and Dena BankBSE 1.07 per cent — have Tier-1 capital below 8 per cent.